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Spotify ‘direct listing’ looking more likely

By | Published on Monday 15 May 2017


It’s looking more likely that Spotify will opt for a ‘direct listing’ on the New York Stock Exchange, rather than going the traditional cash-raising route of a classic initial public offering.

As previously reported, a direct listing would enable existing Spotify shareholders – including the major record companies – to start selling their shares in the company on the investment market, but no new shares would be issued at the point of the public listing and therefore no new mega-bucks finance would be raised.

Although the direct listing approach is unusual – Reuters says Spotify will be the first major company to carry out a direct listing on the New York Stock Exchange – it does have some advantages for companies which want a public listing but which don’t actually need to raise a big new pile of cash.

A direct listing doesn’t dilute the shareholdings of or put limitations on existing investors, and removes some of the costs and risks associated with a traditional IPO. Though it does land Spotify with the extra scrutiny of being a publically listed company without providing a nice big cash boost at the outset.

Reuters cites two sources familiar with the situation as saying that the streaming firm is now plotting a direct listing later this year or in early 2018. Spotify is under pressure to become a publicly listed company because of debt financing it raised last year, which becomes more expensive to service the longer it remains in private ownership.

The newswire says that Spotify is working with investment banks Morgan Stanley, Goldman Sachs and Allen & Co on plotting its direct listing.

The streaming firm has been busy trying to secure new multi-year deals with all the key music rights owners before marching to Wall Street. Universal Music and indie-label-repping Merlin have now signed up to new multi-year arrangements, with new contracts with Sony Music and Warner Music expected to follow.